Maintain 'hold' on Bajaj Auto – TP Rs.1650 - Geojit BNP Paribas Financial Services

- Hold rating is maintained on Bajaj Auto with a target price of Rs.1650 over one year.

- Sales in 1QFY13 increased 3% yoy to Rs.4870 crore and EBITDA increased 4% yoy.

- EBITDA margin at 17.9% is largely in line with market expectations.

- PAT grew 1% yoy boosted by higher other non-operating income and has been better than market estimates.

- Pricing across the portfolio has been better than expected by 3% despite lower contribution from three-wheelers and inferior two –wheeler product mix. Better pricing has lifted gross margin by 150 bps yoy.

- The company has announced further price hikes in its domestic two-wheeler portfolio which could help to sustain margin improvement.

- Despite improving gross margin due to higher pricing and the management's belief that the worst is ended, it seems that volume growth challenges from domestic and overseas markets are still higher for Bajaj Auto.

- Estimates on the stock will be reviewed after assessing prospects of volume growth from new launches and key international markets such as Sri Lanka and Egypt.

Source : Equity Bulls

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